Remarks by the Supervisor of Banks at the Calcalist Fintech 2018 Conference

The Supervisor of Banks spoke today on the issue of
Innovation in Banking and in the World of Finance as part of the Calcalist
Fintech 2018 Conference.The following
are the main points of her remarks:

The developing technology over the past few years is dramatically
changing the world of finance in all forms.
In many countries, payments are moving to smartphones, and tech giants
are beginning to offer more and more financial services.

Technological development is enabling the development of new financial
competitors to traditional banks. Technology companies have become fintech
platforms that essentially constitute an alternative to banks and offer
customers a variety of financial services (companies such as Alibaba and
Tencent in China, for instance).

Technological innovation enables the establishment of “thin” digital
banks, with a far more efficient business model and with significantly lower
efficiency ratios than the banks. In
addition, this innovation enables “financial inclusion”—access to credit for
customers that previously had no such access.

The existing banks are being forced to accelerate their adjustments to
the new and changing world. The Bank of
Israel is encouraging the banking system to adopt these technologies.

The Banking Supervision Department is diligently leading the
technological change. At the end of
2016, the Department established a dedicated division for technology and
innovation. The division is working to lower regulatory barriers that are
delaying innovation, adjust risk management to a changing environment, lead
broad infrastructure projects (such as API open banking that will make all
customer data accessible to all players subject to the customer’s approval,
transition between banks at a click, and more), and guide the banks in
providing digital education—training the public and acquainting it with the
digital environment.

Another large project that will contribute greatly in this context is
the Central Credit Register currently being established at the Bank of Israel, which
will enable the sharing of all customer information between the banks and
nonbank entities, allowing them to make better offers to customers.

We have recently seen many cooperative ventures between banks and
fintech companies. The Banking Supervision Department is encouraging such
cooperation, and believes that they will contribute to customers, banks and the
fintech companies.

Against the background of the significant technological developments
and the opportunities they create, a number of parties have approached the
Banking Supervision Department to establish a new bank. These are digital entities that are planning
to focus on households and small businesses. The Banking Supervision Department
is closely guiding them in them in the process.

In view of this, we estimate that in the coming year, a license will be
issued for a new bank in Israel.​